Accounting Flashcards
(21 cards)
What is the definition of Accounting?
Accounting is a discipline that measures, records and prosess financial infomation.
What is a sole Trader?
A business owned by one person who gets to keep all the profit and make all the decisions. The startup cost is cheap. However, the owner is responsible for unlimited liabilities and personally liable for debts.
What is a Partnership?
A business that has a number of owners, which ranges from 2 to 20. There is shared responsibility and decision-making, easy to establish. However, there is unlimited liability, sharing of profits, less control, and room for disagreements. This all is arranged through a partnership agreement.
What is a Private company?
A company with less than 50 shareholders, limited liability (shareholders are only liable for investment in the business). However, it is costly and has a complex structure.
What is a public company?
A company that has a signficant amount of shareholders (50+), there is limited liability and simple to acess funds. However, it is a complex structure and has to abide by government requirements. These companies list shares on the stock exchange.
State the 3 accounting equations.
A = L + OE,
L= A - OE,
OE= A - L
What is a service business?
A business that provides professional services.
What is a trading business?
A business that sells physical products.
What is a general journal?
Journals provide a format for recording the details of each transaction. The journal is a permanent record used by business owners, accountants, auditors, and government departments such as the ATO. It is used to record many common transactions.
What is the ledger?
The ledger works out how much in total has been spent or earned and provides a summary of these transactions. This summary is known as an account, and it groups together all transactions relating to a particular item. These accounts are listed in a book known as a ledger. There are two formats for presenting accounts in a ledger, the colummar ledger or the T-Style ledger.
What is the accounting entity concept?
Separates the owner from the business for accounting purposes.
What is the monetary principle?
All transactions are recorded in a common monatory unit.
What is a historical cost?
Business record assets at a cost price (not reflective of current market).
What is materiality?
Weather or not info should be recorded on finanical statements (eg;0.50c)
What is the going concern principle?
A business is going to continue its opperation indefininately.
What is GST?
A tax based on consumption, which means the use of GAS. It is set by the federal government on a large number of GAS. Although businesses are also charged GST they are able to claim this back from the government. It is eventually only the final consumer who pays GST.
List some internal controls over accounts receivable?
Credit approval, interest, and discounts recording (subsidary ledgers), Billing (tax invoive, statement of account), Reporting (aged recevible report).
List some internal controls over purchase inventory.
Re-order point/re-order quantity (minimum amount of stock reached a new order is placed), lead time (time between order and delivery of goods).
List some internal control over sale of inventories.
Source documents such as sale orders, tax invoices, and receipts.
List some internal control over stored inventories.
location (stored correctly;sorted and shelved), securirty (locks, cameras, mirrors, security tags), turnover (inventories are turned over fast, cashflow, trends, ensures no discounts have to be offered.)
